Some Terrible Advice I Hope You Ignore

Say it with me: You can't time the market

Dick Bove -- bank analyst, frequent CNBC guest, and apparent purveyor of panic -- has some advice: Sell your stocks. All of them. Get out of the market. The debt ceiling debacle and its aftermath will be that bad.

"I'm basically asking people to get out of the market" he said on CNBC. "Get to liquidity. Put themselves in a position where they can be defensive."

Asked if his call is over the top, he fired back: "I definitely believe the sky is falling. You can call me Chicken Little if you'd like."

Bove isn't just riled up over the debt ceiling. He thinks we're entering a phase where deep structural issues like global trade imbalances will start spinning in reverse. Deleveraging will go into overdrive. Currency debasing will come home to roost. "It seems to me that we've finally hit the point where we're going to have to come to grips with those issues," he said.

Let's put on our Mad Max hats and assume he's right. Assume the economy is about the implode. It rarely pays to bet against America -- but let's do it for now. Pretend things are about to get insane.

What should you do?

Do not follow Bove's advice. Do not sell everything and wait for the tide to turn. This is one of the biggest wealth-destroying traps you can fall victim to.

Some numbers for you to chew on: There have been 20,798 trading sessions between 1928 and today. During that time, the Dow went from 240 to 12,500, or an average annual growth rate of 5% (this doesn't include dividends).

If you missed just 20 of the best days during that period, annual returns fall to 2.6%. In other words, half of the compounded gains took place during 0.09% of days.

This isn't just true for long time frames. The market returned 12.9% in the 10 years ending in 2001, but miss the 20 best trading days during that period and you're down to less than 5%. The Dow squeaked out an annual gain of 2% over the past decade. Miss the 10 best trading days, and you're stuck with an annual loss of 4.6%.

Maybe Bove thinks every stock is overvalued, but I doubt it. Large-cap tech stocks like Microsoft(Nasdaq: MSFT), Apple(Nasdaq: AAPL), Google(Nasdaq: GOOG) and Intel(NYSE: INTC) trade at some the lowest valuations in years, if not ever. Berkshire Hathaway's (NYSE: BRK-B) price-to-book value is the lowest it's been in decades. There are great companies trading at great prices. Stick with those. And turn off CNBC while you're at it.